Why Do Retailers Advertise Store Brands Differently Across Product Categories?

Rachel Griffith, Michal Krol and Kate Smith

Journal of Industrial Economics, 2018, vol. 66, issue 3, 519-569

Abstract: We provide new evidence on retailers’ pricing and advertising of store brands in the U.K. grocery markets. We analyse a simple Hotelling model in which retailers and manufacturers endogenously advertise their respective brands; we account for the impact of advertising on retailer–manufacturer bargaining and downstream competition. The model predicts that retailers advertise their store brands less when advertising is more rivalrous. We present empirical evidence consistent with this prediction. According to our model, aggregate consumer surplus can be higher with store brands than when they are absent from the market.

Date: 2018
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